Gratuity - Should It Be A Part Of CTC

Hi,
I got a question from a prospective employee who picked up his offer letter from me today :
" Why are you(organisation) showing 'Gratuity'(4.81% of basic) as part of the CTC...as I do not get to enjoy the benefit of this component...untill I complete 5 continuos years of service with your company and then decide to leave ?"
"Why cannot it be kept out of CTC"
I had many answers but not sure which one...so I thought I could ask a few experts.
Thanks
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Hi,
This could be done in both the ways:
1. Can be part of CTC - in which case, if the employee leaves the organisation before 5 years, the amount that was withheld should be paid back to him.
2. Can be out of CTC - in which case, the employee gets nothing if he leaves before five years. But, on completion of 5 years, he has to be paid Gratuity as per statute.
By showing it in CTC, the employee knows that the employer is allocating some portion of his compensation for future benefits. The employee should be smart enough to negotiate on Gross salary and not CTC. Now-a-days, even FBT has become part of CTC.

Hi
It's a good point of contention..as how one can charge the employee for the benefit that would accrue after 5 years of service..in today's fast changing times..most of the companies don't have business plans for the next four-five years..
If the organization subscribes to Gratuity fund handled by National Insureres/LIC , then this above is valid as explained by Hema.
If the company does the Acturial Valuation of gratuity and EL balance thereby creating the provision for accrued liability in the books of Accounts ..then it shouldn't be a part of the CTC.
Cheers,
Rajat

I agree with Hema,
From HR point of views, we want the employees to stay and also want to comply with the statutory requirements. Then the way out is to treat the Gratuity and other retirals as part of CTC.

Hi,
Going ahead with Hema's information, I think we should add Gratuity as part of CTC, since there is lot of awareness among the employees.
This would help in hiring and then retaining the employees. They will be
assured about the sum they earned for the said period.
what's other's opinion ??
regards,
Shalini
"Life is 99% attitude " & " Success = attitude"
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